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Starbucks Will Expand in France

Share Swap With Partner Will Give Chain Full Control Over Operations There

By

Mimosa Spencer

Updated Sept. 2, 2009 12:01 a.m. ET

PARIS --
Starbucks Corp.'s
SBUX 0.70%
top international executive said the chain plans to continue expanding its modest presence in France after striking a deal to take full control of the country's operations.

In France, "there is a tremendous opportunity because of the availability [and] quality of real estate for us to continue an aggressive expansion path," said Martin Coles, the head of international operations. "We're talking about an economy, a population base and [economic] growth every bit as good as a market like the U.K.," where the company operates around 750 stores, he said.

U.S.-based Starbucks opened its first French location in January 2004 and now operates more than 50 locations in and around Paris and Lyon, employing about 800 people in the country.

"I think we were worried initially about whether there would be acceptance" of the chain in France, Mr. Coles said, amid a strong cafe culture and predictions that the French wouldn't embrace an American chain.

Starbucks president Howard Schultz stood in front of the first Parisian outlet in 2004.
AFP/Getty Images

He said such worries proved to be unfounded.

To take full control of its French operations, Starbucks announced plans Tuesday to swap shares with a partner, Spanish-based Grupo Vips. The two companies operate Starbucks chains in France, Spain and Portugal under a 50-50 joint venture. Grupo Vips will operate Starbucks chains in Spain and Portugal under franchise agreements.

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"We are seeing in many markets around the world that consumer confidence is coming back from the floor that it hit six months ago," Mr. Coles said Tuesday. He said that the rebound in confidence wasn't a factor in the company's decision to take over its French operations, although "it appears that there's been a softer landing in France" than elsewhere.

Starbucks Managing Director of France Philippe Sanchez said coffee-consumption habits are still evolving in the country. When Starbucks first set up shop on the Avenue de l'Op&eacute;ra in Paris, 20% of drinks sales were for take-away consumption. Now that figure in France has swelled to 70%, Mr. Sanchez said.

Adeline Fernandes, a 26-year-old hotel receptionist in Paris, goes to Starbucks twice a day and orders chai tea. "I don't like the French brasserie -- you can go in to the same place day after day and the waiter will still look at you with a long face," she said. She said she developed the preference for Starbucks after living in the U.S. for two years.